Can CA in Practice do Business Through HUF?

Students and Professionals generally both have curiosity to know whether HUF route is open for doing business for CA in practice. People feel restricted when they realise technically they cannot do business along with practice.

So here is GIST of the matter – CA in practice can be member of HUF, where business is being carried. But he cannot be karta of HUF or Representative of HUF for business. If he is karta / representative, then specific permission will be required and their he will have to prove that he is not actively engaged in business , but then he will be considered to be in part time practice.

Further if business comes to him as share of HUF because of his relation then also above thing will be applicable.
If it would have been allowed, it would have been big loop hole which all CAs would have happily implemented. Practically everything is fine till we or anyone inform ca institute, there is no mechanism to detect it.

Requirement under Regulation 190A
Permission to be granted specifically:
Members of the Institute in practice may engage in the following categories of business or occupations, after obtaining the specific and prior approval of the Council in each case:-

  • Interest in family business concern or concern in which interest has been acquired as a result of relationship and in the management of which no active part is taken.
  • Above Specific Resolution would be equally applicable to member carrying out the activities referred to therein in his capacity as Karta/representative of HUF provided he is not actively engaged in carrying on such activities.

 

Past Cases
1. Where a Chartered Accountant acted as karta of a Hindu Undivided Family (HUF) without taking prior permission of the Council. Held that he was inter alia guilty of professional
misconduct under the clause.
(B.L. Asawa, Chief Manager, Punjab National Bank, Delhi vs. P.K.Garg – Page 728 of Vol. IX – 2A – 21(4) of Disciplinary Cases – Council’s decision dated 16th to 18th Sept. 2003)

2. Where a Chartered Accountant was Karta of the HUF and was engaged in the business of a firm without permission of the Council. Held that he was guilty of professional misconduct under the Clause.
(V. Krishnamoorthy vs. T.T. Krishnaswami – Page 192 of Vol.VII(2) of Disciplinary Cases – Council’s decision dated 27th to 29th September, 1992)

3. A member as a Karta of his Hindu Undivided Family entered into partnership business for a short period with non-Chartered Accountants for engaging in business other than the profession of Chartered Accountants, without prior permission of the Council. Therefore, he was found guilty in terms of clauses (4) and (11).
(R.D. Bhatt vs. K.B. Parikh – Page 191 of Vol. VI(2) of Disciplinary Cases – Decided on 15th, 16th and 17th December, 1988)

4. While applying for membership and Certificate of Practice, a Chartered Accountant did not report that he was a partner in his family business. Held that he was guilty of professional misconduct within the meaning of the Clause.
(Baijnath Agarwalla vs. Gopinath Aggarwalla – Pages 426 of Volume VIII (2) of Disciplinary Cases – Council’s decision dated 26th to 28th August, 2001)

CA Ravi Taori
ravitaorisir@gmail.com

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Hello Everyone, here we are going to discuss a very controversial topic. I will try to be unbiased as I was an article of one of the Big4s. First of all, I have huge respect for them. They are one of the biggest employer and recruiters of Chartered Accountants, employing nearly 1,60,000 CAs. They are trend setters in quality & methodology of work. They are known for their professionalism, but some disturbing facts about them cannot be ignored.

Concentration of work & power By Big4s Worldwide

Recent Study shows that Big4s have captured 80% to 90% of audit revenue worldwide. Whereas in Asia pacific region the revenue of big fours was 21.49 billion US $ in 2017. The European Union want to break up this oligopoly of big4s. As they are getting bigger and powerful, they have access to loads on information, they are in dominating position. This is anti-competitive. In India they have acquired many midsized firms again to become bigger and powerful.  Many Central Council Members are from Big4s and some are indirectly supported by big4s. No wonder you don’t see any action against them from ICAI even after Sataym & GTB scams.

 

Are they Legal, is big debate?

Foreign firms and professionals cannot directly practice in India as per CA Act and give Audit Services. As Indian firms cannot directly function in foreign countries they cannot function in India as per Sec 29 of CA Act. Audit constitutes more than 50% of there total revenue worldwide.

 

So, they took help of Indian Chartered Accountants, created firms with all Indian CAs as partners. Like EY created SR Batliboi & Co, KPMG created BSR & Co further Big4s are on acquisition spree. PWC acquired Dala & Shah and so on. Now these Indian firms have their offices with foreign brands, they work closely with corresponding consulting companies, they cross sell services to clients, they share systems & software’s with them. They are virtually integrated with them. They pump money in these Indian firms. PWC Netherland gave 41 crores as interest free loan to PWC Kolkata partners who in turn, introduced it as capital and then acquired Dalal & Shah. PWC has given around 240 crores to Indian affiliate firms. PWC has indemnity insurance policy of 280 crores which is collectively used by all sister firms which again shows. They are virtually one only legally different. If they are doing so much they must be getting something in return in the form of charges for these services. So basically, they have full control of these Indian firms and in short, they are indirectly practicing in India. It is clearly killing of spirit of law created. They are violating Sec 25 CAs creating corporates for accountancy services, Sec 29 doing practice in India when we cannot do it in US or UK. Advertisement Clause / Sharing of Fees Clause. Open many websites and you will find ads from Big4s.

 

Impact of Indian CA Firms

Indian CA firms are muscled out with financial and tactical powers of Big4s. It is killing entrepreneurship of Indian CAs. Reducing their revenue and profits, these profits go to Big4s and to their foreign headquarters. They are not entertained for big assignments, even many government contracts are bagged by them.

Some Indian CAs are fighting against these powers through legal and other modes. But it will need a lot to bring a change. Reliance Industries always employs Indian firms as joint auditors. Modiji said we want our Indian firms as big4s.

It affects India as nation also, all crucial information about companies, economy is indirectly available to foreign controllers.

Video on above article

https://www.youtube.com/watch?v=FUZCld0HXeY

Legal Proceeding and Judgements:

Please refer the below link for Supreme Court latest Judgement on the issue discussed above:

https://sci.gov.in/supremecourt/2013/35041/35041_2013_Judgement_23-Feb-2018.pdf

Further Detailed discussion:

The above issue regarding MAF’s V/s ICAF’s and decision of the Supreme Court has required a detailed study of every aspect of allegation and violation.

For detailed study Please refer the link:

https://1drv.ms/b/s!AqxpYGo5-Bccg4BEuY0RWECk70Ngfg

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You read the question paper. You smiled because you knew the answer. You were very confident that I know the answers and you would be scoring good marks. Exams are over, and you await the results. After the results are announced you are shocked because you did not score that you expected. It is so because you made few silly mistakes. For e.g. Instead of writing SA 510 you wrote SA 501. Your answer is right, but you quoted a wrong SA number. So, it’s possible that you might lose marks.

Watch Video – https://youtu.be/zuBzcMBrjfI

So in this article I am sharing with you few tips to help you avoid these kinds of Silly Mistakes.

1. Speak while you read and write
Try to speak while you read the question paper and also while you write the answers. This does not mean you do it loudly and disturb others. You should speak without making any noise. Speaking will help you to interpret the questions in a better way. Also, if you speak while writing there are less chances of making any silly mistake. You will write what you speak.

2. Use your Thumb
Try to keep your thumb just above the line in which you are writing. This way you will avoid silly mistakes as your concentration will be completely on what you are writing.

3. Jot down important points
It must have happened with many of you that when you read questions, many things come flashing in your mind. Like in this answer I have to write so and so point, this one’s important, this SA needs to be quoted etc etc. But when you actually start writing you remember very few of these.
First of all underline all the important words in the question. So that you know what all needs to be covered in the answer. Then jot down all those points that are flashing in your memory with a pencil on your answer sheet. Write down all those points so that you don’t miss any of them.

4. Last line
Read the last line of the question very attentively. Sometimes the questions are big and in hurry we don’t read it carefully and misinterpret the question. Majority of the times the last line of the question has all things. It tells you very clearly what is expected in the answer. For example, wherever there is mention of Private Co. please underline it. Also whoever you find words like no, incorrect or negative words are written be extra careful.

5. Small sentences
Try to frame small sentences. It happens many times that when you write big sentences, by the time you finish them it does not mean what you intended. They mean completely different. So try to write small sentences so that everything that you want to write is properly explained.

6. Take proper sleep
It is very important that your brain is cool and calm before your exams. So please take proper sleep of 7-8 hours before your exam. Also stop studying 2 hours before your exam. Try to relax and do masti and enjoy your time. This will rejuvenate your brain and take the burden of exams of it. This way you will have better concentration during exams

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How to complete 100% AUDIT paper in 3 hours??

Every day I get lot of messages from students asking for tips to complete 100%paper in 3 hours. So I have tried to list down certain tips which should be beneficial for all the students. These small tips will help you perform better in your exam.

Watch Video – https://youtu.be/KZkfXUBvPgg

TIPS TO COMPLETE 100% PAPER

 

  1. 60-40 Rule

First of all, try to understand that, writing 100% paper with 100% quality is not possible. It is a myth that you can complete full paper and do justice to all questions equally. So now what do we do?

Divide your paper in 60-40. First 60 marks you should write very nicely. You should write in depth answers of the same. Answers should be written in such a way that the examiner is impressed by them. It should cover all the important and necessary points. These answers should be perfect in every possible manner.

But you will attempt these 60 marks in first 2 hours i.e. 120 minutes. That means you will have 2 minutes for every 1 mark. For example if you have are solving 5 marks question, then you have 10 minutes to solve it or if you have 6 marks question you have 12 minutes. So these 60 marks should be attempted in the best possible way. So if you score 80% in these 60 marks it will be 48 marks, which is a fair score. Even if you score 75% that comes to 45 marks.

You will solve remaining 40 marks in 1 hour that means 1.5 minute for every mark. If you take 45-50 minutes it will be very beneficial. This way even if you score 1 mark in every question totaling to 10-15 marks from these 40 marks. It will be a good attempt. This way you will be able to attempt 100% paper.

 

  1. Last Page Rule

As soon as you get the answer sheet, go to the last page. Here write down all SA numbers, CARO clause numbers, tax audit clause numbers, professional ethics clause numbers. If you are from IPCC then write down companies act sections. Write down everything that is difficult to remember. Otherwise what happens when you start writing the paper you just become blank. You think I just knew the clause number but right now I am not able to remember it. You get confused and tend to write wrong clause numbers. Writing them down on last page will help you write correct numbers and clear your confusions whenever needed.

 

  1. Used Pen Rule

You should try to use a pen you have already used earlier. Do not try a new pen. Used pen is smoother and you are used to writing with it. So your speed will be faster with that pen. Actually I have even seen many students and even toppers use those 2-3 rs pens. These pens I suppose are very lighter and they glide faster. So it gives good speed toy your writing.

 

  1. Use of Writing Pad

This is an unusual tip. But if it helps then its good. I have heard someone giving this tip so thought of sharing with you.

Try to keep 2-3 pages between the page you are writing on and your writing pad. You answer sheet is of 30-32 pages. So when you keep such a big bunch of papers underneath it becomes very soft and this may reduce your speed of writing. So keeping just 2-3 pages would help you to improve your speed and save time.

 

  1. Avoid Distractions

Please try to avoid any kind of distractions whatsoever. Forget everything and anything around you. Because you are in a deep thought when you are writing your paper. So when you get distracted it takes a lot of time to again concentrate and come back to the place from where you got distracted.

 

  1. Solve easy ones first

One of the popular tips. Please solve the easy questions first. But do not spend lot of time on them Keep in mind that you have 2 minutes for every mark. You cannot be spending more time on these easy ones.

 

  1. Difficult questions

It generally happens with students that they give too much time to some difficult questions which disrupts their flow of writing the paper. So please be very cautious and careful while spending time on the difficult questions. Please follow or 60-40 rule while giving time to the questions.

 

I hope these tips help you to achieve greater milestones. Best of Luck.

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Interesting Audit Updates

Audit reports of FY 15-16, will have a New Annexure to Independent Auditor Report for all companies.

Infact it is not just such annexure it is full fledged separate report in itself.

“Report on the Internal Financial Controls(IFC)”

Following will be the key components of this report as per Guidance Note on IFC

1.Intro
2.Management Responsibility for IFC
3.Auditor Responsibility
4.Meaning of IFC over Financial Reporting
5.Inherent Limitations of IFC over FR
6.Opinion
7.Signature
8.Place
9.Date

Happy Additional Responsibilities !!!

If report is in appropriate happy exorbitant fines and damages!!!

I hope client pays additional fees!!!

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As per Para A11, SA 230, auditor CAN prepare Completion Memorandum or Audit Summary, its optional not at all compulsory.

It is advisable to prepare it in large and complex audits.

Because it helps efficient and effective reviews (by seniors of juniors work) and inspections (after completion for quality testing).

Auditor records significant matters encountered during audit and how they were resolved. It can be prepared in any format, need not be understandable by experienced auditor as it is voluntary.

It also helps next year team to get birds eye view of audit, so they can plan next years audit.

Further I will sending amendments for Nov 15 by month end.

CA Ravi Taori
auditguru.in

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Interesting Audit Update

As per SA 330 it is not mandatory to perform test of controls each year, it should be done once in 3 years.

Provided there is no change in controls from the previous year in which it was last checked.

But there is one important EXCEPTION , controls which are working to protect against “Significant Risk” ( where likely hood and impact of misstatement is high) should be checked “each year”.
CA Ravi Taori

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Hello everyone, want to share a interesting point, some of you must have noticed it, its relevant for CARO. It can be used to get many advantages.

Private company which is subsidiary of public company will be deemed to be public company taking away all benefits of private company.

But to boost foreign companies and increase ease of doing business in India, MCA clarified that status of private company which is subsidiary of foreign holding company will not change that means deeming provisions will not be applicable to them. (Earlier 100% should be held by one or more foreign bodies was required, now there is no such condition )

so be careful in exams in such cases company can get exemption from CARO. And in practical life you can have added advantage.

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Out of the box by ICAI (CA Final Audit Nov 16 Paper Analysis) “Though not difficult but definitely out of the box paper by ICAI”

• Only 37 marks out of 116 from Practice Manual / Past Papers last time it was around 60

• No question was asked from Nov 16 RTP, last time around 12 marks were asked

• Case Study of only 4 marks from Professional Ethics, generally it is 16 marks case studies which are most scoring, Other 2 questions were simple but theory based.

• Company Audit & CARO accounted for 16 marks which were for 28 marks last time.

• Around 60 marks questions from small chapters which were asked for 40 marks last time. But the big change is many questions were new from remote corners of module, last time they were from PM.

• Once in 3-4 attempts you get such paper.

• If some has good conceptual knowledge they would have written good answers, may not be exact as expected, but they can expect reasonable marks.

• All above things are justified by ICAI as it is a CA Final examination, which is one of the toughest in the world.

• It appears as if, examiner studied books & notes of all popular professors, then marked areas of module (2073 Pages) which were left out by all, as they were never asked for so many exams. And then many questions were asked from such remote corners of module.

• I expect checking will be lenient.

Read more at: https://www.caclubindia.com/articles/out-of-the-box-audit-paper-ca-final-nov-16-28166.asp

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#‎Audit‬ Updates

‪#‎SA260‬ says that it is related to communication of auditor with ‪#‎TCWG‬ and not with management. So SA 260 specifically guides what to communicate when to communicate with TCWG. Now in some organisations TCWG and management are same. They only work and they only supervise. So TCWG = Management. Then in such case are we still suppose to communicate, or management must be aware about all things, no need to have again communication??? Answer is as per SA 260 if both are same we have to do all communications as required by standard with Management only which is even TCWG. But communication is must we cannot ignore, even if both are same. Be careful, else it will lead to deviation from requirement of SA 260.

CA Ravi Taori

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Interesting Audit Update

As per SA we have to perform risk based audit that means where there is more risk then more audit efforts, we don’t treat all areas equally while selecting audit procedures.

Many researches has identified that revenue recognition is very sensitive area and it is prone to misstatement.

Hence when #SA240 was drafted, it is specifically mentioned in Para 26 that PRESUME that there will be risks (Not high risk just risks) in revenue recognition, so automatically we pay more attention to revenue recognition checking.

But this presumption is rebuttable that means if we have reason to justify no risk, then we can ignore this presumption and go for simple / limited audit procedures and we have to document reasons.

For example if company get revenue from single leasehold property and there is long term agreement for many years then there is no risk in revenue recognition of rent.

CA Ravi Taori

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We are taking initiative to bring CA Firms & Students closer to reach other. So that firms get good articles and students can get suitable firms.

CA Firms can fill up small form about contact details, location and expected work in this link

https://goo.gl/9OPVKg

above form can be filled up by partners, employees and existing articles or any known person of firm.

CA Students can fill up their contact details and location in the given so that we can send list of firms with area of work expected during article-ship.

https://goo.gl/jkYOVT

So help each other for betterment of article-ship

CA Ravi Taori

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It’s regarding audit of Insurance companies.

Earlier government was very cautious with share capital of Insurance company hence, Insurance companies could have only “Equity Shares”

But not after amendment of 2015 which is applicable in Nov 15 exams.

Government has given power to IRDA to prescribe other types of shares also.(No announcement from IRDA yet)

Further limit of 49% (26% automatic without approval and above 26% with CG approval) is applicable only to Equity shares.

So plan is clear in some time IRDA will allow preference shares and foreign companies will be able to buy even 100% of preference shares.

Loads of money will flow to Insurance sectors.

 

Get Regular AUDIT Updates

(SMS Subscribe to 9096000033)

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Many students keep asking this question that why I score between 150-200 in a group or 30-40 in a particular subject? Why I can’t score more? I have done my classes. I was serious in my studies & during exams also. I have sacrificed lots of things. I was good in IPCC. But why I am not able to crack finals or particular group? Why Why Why Why Why?

Ok guys point is
You all know about it…
You don’t know you are not having it….
You don’t know how to get it….
You work less for it….
Ok so it is a biggest killer is…..

So what is it?? Let’s analyse few things first.

FR

In financial reporting you know proposed dividend should “not” be deducted for computing capital employed but it “should” be deducted for computing net assets. But why this distinction is there??

Sometimes we have to take weighted average and sometimes simple but Why??
Proposed dividend is not a liability but it is written in short term provision. But Why??

SFM

We know what Walter’s formula is, we have practiced 20 problems but we don’t why it is like that , why it is different from Gordon formula and we get confused or make silly mistake at last moment in exams…

Audit

We know there is peer review, quality review, review v/s audit, review by senior but we don’t know what the difference between them is. We know risk at financial statement level and assertion level but we don’t know when to apply & where to apply.

Costing

We know formulas for standard costing but we don’t know why we multiply by actual rate and why we multiply by standard quantity??

And list goes on and on and on and on…..

So problem is
We don’t ask “why” on each step?
We don’t compare things and ask why there is a difference?

This is because
We don’t have time to go in-depth?
We want to give both groups, we want to do multiple revisions & hence we don’t time to ask why!!!

We want to run very fast achieve very fast? Point is you need to slow down learn slowly step by step make strong foundation and then conquer exams.

Further…
We get tensed when we spend more time on concept, hence we don’t ask why???
We lose interest when we don’t crack something, hence we leave Why???
We don’t know how to understand something, hence we leave the concept.
We don’t ask doubts because people will think I am a fool!!!
There is no one to solve high level doubts / why

We simply read and solve again & again and remember things and produce it from memory.

Memory is bad 50% of times, we get confused many times; we do silly mistakes and we keep scoring low.

Guy’s the biggest reason is we don’t ask “WHY”???

So What is the solution?? What to do???

If you Score below 180 go for one group.
Target next 100 days for in-depth studies.
For one week study, the first half day one subject and the other half another subject.
Revision and cumulative revision on Sundays with suggested answers or Scanner?

Take guidance from professors for each subject. Ask this “why” to each one of them again and again without hesitation, after you try to think about these doubts for at-least 2-3 days on your own? This will develop your thought process?

Study Methodology

Step 1: Why this concept is there? Read all the “questions” only questions not answers related to this concept at the start to increase curiosity

Step 2: Read whole concept at one stretch? Then ask why I was not able to think on my own, where I was lacking in the thought process?

Step 3: How to remember? Which flow is good, diagram is good, story is good, mnemonic etc

Step 4: Write key words in sequence to remember, don’t make bulky summary.

Target weekly Sunday revision and only one revision of all 4 subjects in last 20 days? Till that time keep asking why?

Study with slow and steady speed, ask rationale behind each step, take guidance from knowledgeable people, and aim quality not quantity

Good luck!! for guidance contact ravitaorisir@gmail.com or whatsapp 9096000033

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